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Using Equity or Savings for PPOR deposit

Discussion in 'Accounting & Tax' started by albanga, 3rd Feb, 2016.

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  1. albanga

    albanga Well-Known Member

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    Hey All,

    Just a quick question, not sure what the right answer is.

    Say I have 60k in savings and 60k in equity that has been released and is now sitting available to use.
    Going to purchase PPOR and need 60k to close out the deal. I will need to use some of the other 60k for furniture and also will become contingency funds, so basically personal use.
    No plans in the next 3-5 years to purchase an IP.

    If I pay the 60k from savings and use the equity then it becomes mixed use for future use.
    If I pay the 60k from the equity loan then it becomes non deductible.

    I am thinking it probably comes down to IR? And given PPOR IR's are more competitive then it probably makes the most sense to use the 60k savings as a deposit and then slowly draw down on the borrowed funds for personal use?

    OR there is just a better way to do it?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would be better to borrow for the property purchase rather than borrow for furniture as if the property is ever rented out you will have a higher deductible debt. If you borrow partially for the property and partially for the furniture you will have a mixed purpose loan which would become an issue when tax deductions are claimed.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I'd use the equity and then put the cash in an offset account against the equity release. Gives you the best of both. I'd spend as little on furnature as I could.

    Of course, the equity release needs to be structured so it's separate from the investment loan and won't contaminate the deductibility of the original inevestment loan.
     
  4. albanga

    albanga Well-Known Member

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    @Peter_Tersteeg just edited my post because what you said just jerried!! Ofcourse!

    ahh ofcourse @Terry_w I forgot the potential if ever turned into an investment property that the 60k would then again become deductible!

    Thanks guys, you make it so easy
     
    Last edited: 3rd Feb, 2016